Swiss Franc Versus Dollar
The Franc stayed firm against most major currencies, but it lagged the Dollar. Demand for the Dollar increased after the US-Israel war with Iran escalated. The Franc first rose on safe-haven demand as the conflict began. Those gains faded after the Swiss National Bank signalled it could intervene in foreign exchange markets. Middle East tensions remained in focus, with few signs of de-escalation and a higher risk of a longer conflict. The Wall Street Journal reported that the Pentagon is sending three warships and thousands of extra Marines to the region. This followed comments from President Donald Trump that the US would avoid deploying ground troops in Iran. Higher energy prices supported the Dollar because oil is priced in USD.Central Bank Policy Outlook
Both the Federal Reserve and the Swiss National Bank left rates unchanged. The Fed held 3.50%–3.75%, while the SNB stayed at 0.00%. Higher oil prices may raise US inflation and delay Fed rate cuts. Swiss inflation remains low, and a strong Franc can limit imported inflation. Looking back to late 2025, we remember a period where the US dollar was strong, largely because of the US-Israel conflict with Iran. This tension pushed oil prices higher, and since oil is priced in dollars, it boosted demand for the currency. The dollar was also the preferred safe-haven, leaving the Swiss franc behind after the Swiss National Bank (SNB) hinted it might intervene. The situation has changed significantly as we stand here in March 2026. The de-escalation of military activity in the Middle East in January has removed much of the geopolitical risk premium from the market. As a result, WTI crude oil prices have fallen from over $110 a barrel during the conflict’s peak to a more stable range around $78 a barrel this month. This shift has directly impacted central bank outlooks, especially for the Federal Reserve. With lower energy costs, US inflation has cooled, with the latest Consumer Price Index (CPI) reading for February showing a 2.8% year-over-year increase. This has allowed the Fed to begin its easing cycle, cutting its benchmark rate last month to the current 3.25%-3.50% range. In contrast, the SNB has been dealing with a persistently strong franc, which has kept Swiss inflation very low, last reported at just 1.1%. To combat deflationary pressures and the franc’s strength, the SNB preemptively cut its own policy rate to -0.25% in its December 2025 meeting. This shows that while both central banks are easing, their motivations are fundamentally different. Given these dynamics, the environment that held the USD/CHF pair near 0.7900 last year has completely reversed, with the pair now trading around 0.7550. The shrinking interest rate advantage of the dollar over the franc suggests this downward trend may continue. Derivative traders should consider positioning for further downside in the pair. Buying USD/CHF put options with expirations in the next three to six months could be a prudent strategy to capitalize on this trend. Market volatility has fallen since the war premium vanished, making options pricing more reasonable than it was a few months ago. This allows for a defined-risk way to bet on a weaker dollar against the franc. Create your live VT Markets account and start trading now.
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